2010 ANNUAL REPORT - Watercare

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WATERCARE SERVICES LIMITED ANNUAL REPORT 2010Auckland Transition Agency Executive Chairman Mark Ford sounds a horn to signal the start of demolition work being undertaken as part of Project Hobson. He is joined by AucklandCity Councillor Douglas Armstrong (far left), Watercare Chairman Graeme Hawkins, Auckland Regional Council Chairman Mike Lee and Watercare Transition Chief Executive Ian Parton.chairman and transition chief executive's reportextensive experience in the retail water and wastewater sector. In theinterests of transparency, independent observer Jane Latimer andAuckland Transition Agency representative Brian Monk attended boardmeetings also over the transition period.Over the past year, demands on the board have increased significantly.Directors moved to fortnightly meetings in 2010 to manage theinformation and decision workload associated with integration.Furthermore, an amendment to the Trade Waste Bylaw, as a resultof integration, created additional demands on directors’ time.The company undertook a comprehensive strategic planning processas it prepared for integration and developed a strategic framework,new vision and company values. The strategic framework will helpto coordinate and drive decision-making to address the challengesassociated with being the water and wastewater services company forthe people of Auckland.Regionally-focused initiatives began to be developed, such as thepreparation of a Regional Asset Management Plan which covers a 20-year period and will represent Watercare’s tactical plan for managingWeblinksFigure:Directors’ meeting attendance Fig. 8the company’s infrastructure cost-effectively to achieve it's longtermgoals. A regional plan offers the opportunity for the integratedmanagement of bulk and local networks to provide future prospectsfor regional prioritisation and coordination of initiatives to deliverefficiencies and cost savings. Long Term Infrastructure Plans (50-yearplans) and Facility Plans (five-year plans) also are being developed insupport of the regional plan.Despite the extra work created by integration, the company maintainedits focus on the delivery of some significant projects. This yearconstruction work was completed on Project Hobson, with thewastewater storage tunnel and high-capacity pump station enteringfull-time operation. Already, the number of wet-weather overflowsoccurring in Hobson Bay has reduced. Work to demolish the ageingsewer that bisects the bay has begun. This will enhance the areaboth in terms of aesthetics and recreational opportunities.Good progress was made on the Hunua No. 4 Trunk WatermainProject. Watercare worked cooperatively with other agencies andstakeholders to maximise opportunities to construct sectionsin conjunction with other works. Most significant has been theconstruction of the section suspended under the new ManukauHarbour Bridge. Such cooperation minimises future public disruptionand maximises efficiencies of working together for public benefit.Regulatory consents and notices have been applied for and a hearingis scheduled for August 2010. Consultation with people most affectedby the alignment and construction of the watermain continues.10
Chairman and Transition Chief Executive's Report continuedWATERCARE SERVICES LIMITED ANNUAL REPORT 2010The proposal to rehabilitate a former quarry on Puketutu Island withtreated biosolids progressed after the consents were declined in 2009.Watercare worked constructively and cooperatively with iwi to resolveoutstanding issues and is now looking to settle the appealsto the Environment Court which will allow the project to proceed.The company's relationship with iwi is important to the success ofthese types of projects. In 2009, a Memorandum of Relationship withTainui was signed that recognises both parties’ roles and the desireto work together to build a strong, balanced and enduring relationship.The team working on the Central Interceptor Project, which involvesthe development a large-diameter tunnel to store and move wastewaterfrom parts of Auckland and Waitakere to the Mangere WastewaterTreatment Plant for processing, continued to make good progresson the design and consenting phase.On top of the usual project workload and additional demandsof preparing for integration, the Auckland region faced the driest fourmonthperiod (January to April) in 100 years of records for the Waitakerecatchment and 50 years of records for the Hunua catchment. In response,Watercare maximised production from the Waikato Water Treatment Plantto preserve lake storage and ran a ‘use water wisely’ publicity campaign toreduce demand. As a result of these actions, combined with high rainfallover winter 2009, the region avoided mandatory water restrictions. Waterlevels in the storage dams returned to normal in May.The record dry spell highlighted some of the challenges we face indelivering high-quality undisrupted water to a region which continuesto grow. Over the year planning work progressed on the timing ofthe next Waikato Water Treatment Plant upgrade to take and treatadditional water from the Waikato River and a decision was made toincrease plant capacity in 2012. While the additional water sourcedfrom the river remains within the limits of the current resourceconsent, future water sources for Auckland will be more costly to bothsource, treat and distribute than our gravity-fed dam supplies.This year Watercare achieved an operating surplus from trading of$9.1 million. This was primarily due to maintaining tight control overoperating costs and increased revenue as a result of good water salesover the summer drought period.Watercare actively uses interest rate swaps to manage its interest costsfrom borrowing. As a result of the revaluation of these interest rateswaps to market values, which is required under current accountingstandards and tax rate changes to the depreciation of buildings,the reported net loss after tax was $27.7 million.We would like to thank our existing customers – the councils andLNOs – for their cooperation and support through this period ofsignificant change. Furthermore, we would like to also acknowledgeour shareholders for their support over the transition period.We look forward to continuing the productive relationships withthe new shareholder, the Auckland Council, following integration.As we move into a new era of local government, the company remainscommitted to delivering outstanding services at an affordable price.Our focus on business efficiency and minimising costs will continuewhile ensuring reliable services are delivered to our customers.We will also continue our commitment to being a good corporatecitizen and to integrated reporting that reflects the important role weplay in contributing to the health and well-being of our communities.On 30 August 2010 the company announced the price for water effectivefrom 1 July 2011 at $1.30 (including 15% GST) for 1,000 litres. It wasparticularly pleasing for the board to note that the long awaited benefitsfrom industry integration in Auckland were able to be delivered at such anearly date, a great tribute to management and staff involved. Watercarepricing and its tariff structure will be the subject of discussions with thenew Auckland Council and will come into force on 1 July 2012, the dateat which the new property rating system for the region commences.This will be the last annual report we complete in our current roles aswe both finish our terms with Watercare in the current financial year.It is with tremendous pride that we review the company’s performanceover my eight years as Chairman and Ian’s ten years, first as a director,then Deputy Chairman and finally as Transition Chief Executive. We aredelighted to have played a part in the company’s success and thankmanagement, staff and fellow directors for their support over this time.G S HawkinsChairmanI PartonTerry KayesDirector of Watercare Services Ltd (2007 to 2010)Transition Chief ExecutiveTerry was managing director of Tonkin and Taylor Ltd, a specialistenvironmental and engineering consultancy, for 17 years. He joinedthe Board in 2007 and served for three years until his tenureexpired in January 2010. Terry’s former experience and engineeringexpertise were welcomed by the Board during his term as a director.Over this time Terry made a valuable contribution to the Boardas the company achieved some significant milestones includingthe completion of the Three Waters Strategy, excellent progresson Project Hobson, the Puketutu Island rehabilitation project,the Hunua No. 4 upgrade as well as the early stages in preparationfor integration of the water industry. Terry’s service and commitmentto the success of Watercare are gratefully acknowledged.WeblinksStories:Hydraulic jaws take first bite out of ageing sewerStaff in awe of the scale of HobsonHobson’s HeroesConstruction underway on Hunua 4Campaign heats up despite break in dry spellFigure:Organisational structure Fig. 9Chairman and transition Chief executive's Report11
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IndexWATERCARE SERVICES LIMITED ANN
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2010 ANNUAL REPORT - Watercare

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